MacroMonitor Market Trends Newsletter
September 2014

The MacroMonitor Market Trends Newsletter from Consumer Financial Decisions (CFD) highlights topical news and trends of interest to you and your colleagues.

The Impact of Divorce on Retirement

In the 1980s, the nationwide focus changed from "us" to "me," "Greed is good" (Gordon Gekko in the film Wall Street) became an acceptable mantra, conspicuous consumption became a national pastime, and US divorce rates peaked at 23 per 1000 married women (according to the National Center for Family & Marriage Research at Bowling Green State University, using American Community Survey data). MacroMonitor data following that decade indicate the incidence of divorced or separated household heads was flat (between 1992 and 2012—15% and 16%, respectively). Although the data show that the divorce rate has declined from 17% in 2000 to 13% in 2008, the rates for household heads younger than and for household heads older than age 50 diverged. Since 2008, the incidence of divorce for household heads age 50 and older has risen from 15% to 22%.

The decline in divorce rates for household heads younger than age 50 may be attributable to the fact that the average age when men and women marry has increased in the past several decades; family formation occurs later now than previously. In 2011, the average age for men to marry was 29 and for women, 27, in comparison with age 23 for men and age 21 for women in 1970 (according to the US Census Bureau); 42% of women younger than age 20 were married in 1970. The increase in divorce for households older than age 50 is especially troubling, because the event occurs during peak earning years—a time when households need to focus on retirement seriously. Divorce and separation divide accumulated assets, often resulting in two households unable to retire comfortably. Newly single–headed households present financial-services providers with a potential opportunity to meet new and different financial needs. For example, the majority of current retirement products by design provide for dual-headed households. Separation and divorce do not mean that responsibilities for others—parents, peers, or children—have disappeared.

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